AstraZeneca's Iressa Failure Could Be Catching

AstraZeneca(AZN Quote - Cramer on AZN - Stock Picks) said Monday that its experimental cancer drug, Iressa, when given with standard chemotherapy, failed to improve the survival rate of lung cancer patients in two large, late-stage clinical trials.

Iressa is a one of a new class of targeted cancer drugs and is currently under review by the Food and Drug Administration for use by itself in patients with advanced lung cancer. But the poor results released Monday for Iressa used in combination with other cancer-fighting drugs -- first reported by TheStreet.com in May -- raise doubts about the drug's efficacy and chances for FDA approval by the end of the year.

ImClone Systems(IMCL Quote - Cramer on IMCL - Stock Picks), OSI Pharmaceuticals(OSIP Quote - Cramer on OSIP - Stock Picks), Genentech(DNA Quote - Cramer on DNA - Stock Picks) and Abgenix(ABGX Quote - Cramer on ABGX - Stock Picks), like AstraZeneca, are developing their own targeted cancer drugs which work by interfering with a protein called epidermal growth factor that regulates growth in cancer cells.

But the Iressa test results, more ominously, raise questions about the potential for any of these experimental therapies, known as epidermal growth factor receptor drugs, or EGFRs, to significantly boost survival rates when used in combination with chemotherapy, according to AstraZeneca executives.

AstraZeneca shares were down $5.43, or 15%, to $31.57 in Monday trading. OSI was off $11.88, or 36%, to $20.90. Its partner, Genentech, was down $3.09, or 9%, to $32.40. ImClone dropped $1.24, or 13%, to $8, while Abgenix was off $1.38, or 14%, to $8.46.

Tough to Swallow

AstraZeneca didn't release actual results Monday but said that two Phase III clinical trials showed that Iressa, taken as a pill, did not provide improvement in survival when the drug was added to a standard chemotherapy treatment. The trials enrolled about 2,000 lung cancer patients.

Last May, however, AstraZeneca presented results that showed Iressa as an effective drug when used by itself, or as monotherapy, in patients with advanced lung cancer who have run out of other medical options. The FDA is currently reviewing the approvability of Iressa used in this way, and the drug was supposed to slated for discussion at an upcoming FDA cancer drug advisory panel meeting in September.

AstraZeneca executives, speaking on a conference call Monday morning, say they have informed the FDA of the latest test results but are hopeful that the results won't affect the current review process. However, the executives could not guarantee it, raising the possibility that Iressa would be yanked off the agenda of the September advisory panel meeting.

In March, TheStreet.com was first to report that results from the Phase III Iressa combination trials were pulled from the 2002 annual meeting of the American Society of Clinical Oncology. In May, as the Iressa monotherapy results were reported at the ASCO meeting, TheStreet.com reported that the company was aware that results from the Phase III combination trials were disappointing, showing some survival benefit but not enough to meet the clinical goal of the studies.

Monday's results were actually worse. The use of Iressa resulted in no survival benefit whatsoever, compared with that of standard chemotherapy treatments, according to AstraZeneca executives. Moreover, the poor results were not a result of an underpowered study.

"It doesn't matter if we would have had 50,000 patients [in the studies], the results would have been the same," said AstraZeneca CEO Tom McKillop.

Additional analysis must be completed, but McKillop said the company's scientists believe that Iressa does not likely work synergistically with other chemotherapy drugs, as previously thought. In fact, it's his belief that none of the so-called EGFR drugs will prove to work this way, although he has no data to support that, he added.

Iressa is one of AstraZeneca's most highly anticipated new drugs, which are supposed to help the pharmaceutical firm make up for the lost sales due to upcoming generic competition for its heartburn medicine, Prilosec. Iressa's success became even more important recently when the company announced a delay in the launch of its new cholesterol drug, Crestor. Iressa is already approved in Japan as a monotherapy, but has not yet been submitted to European drug regulators.

Despite Monday's disappointing results, McKillop said he believes Iressa is still an important and useful drug that is clearly effective when used as monotherapy. "A lot of patients are getting real benefits from Iressa. We believe Iressa will be a successful product."